US IT Firms To Discuss FDI In E-Commerce With India

by CXOtoday News Desk    Dec 11, 2013


Top representatives from US-based IT companies such as Oracle, IBM, HP and Cisco will meet the high officials of the Department of Industrial Policy & Promotion (DIPP) in India next week to discuss the Government’s proposal on allowing foreign direct investment (FDI) in e-commerce and share their concerns about local sourcing norms.

Many believe that the proposed FDI policy for e-commerce could result into greater business opportunity for IT players who are in the hardware and software vendors and suppliers. Currently, India allows 100% FDI in B2B e-commerce. However, it does not allow the same for B2B e-commerce category.

Nasscom has been supporting this initiative for a while now. Last month, Nasscom President Som Mittal had met Saurabh Chandra, Secretary of DIPP to discuss the possibilities for allowing FDI in e-commerce.

Mittal had earlier said in a statement that FDI in online retail will generate more foreign exchange money, which is anyway going to help the country.  Mittal stated that with global digital integration, alongside widespread use of Internet and convenience of online business transactions, FDI in online retail may offer greater growth opportunity in this segment.

The DIPP is already in the process framing a draft policy to allow FDI in e-retail, allowing B2B transactions. Senior officials from Nasscom, the representative body for the Indian IT industry, are scheduled to meet DIPP Secretary Saurabh Chandra today to discuss the safeguards they want in the proposed FDI policy for e-commerce.

Nasscom has already recommended to the DIPP that there should be mandatory local sourcing norms incorporated in the policy, which would require the foreign investor to source a portion of its supplies locally. The report states that local sourcing is already a part of India’s FDI policy for multi-brand retail. Foreign retailers are required to source at least 30% of the value of their manufactured/processed products from Indian small and medium industries.

The IT officials from the US will also meet other ministries such as telecom and finance, apart from DIPP Secretary Chandra. According to an official, the meetings will focus on safety testing, security testing, taxes, privacy, cloud, opening up of e-commerce to FDI, electronics manufacturing, and e-waste.

The US e-commerce companies such as Amazon and e-Bay have a lot of interest in the Indian market. Amit Deshpande Amazon Director and General Manager - Seller Services recently said in an interview that FDI in e-commerce will not only offer more choices to customers but will also improve the level of customer service for the industry. Once the government relaxes FDI in e-commerce, will follow a hybrid model where apart from marketplace model, it would begin ‘retailing products’.

A number of domestic players are also in support of FDI in online retail, as they believe it will open new opportunities for retailers and enable the market to fast mature.

A report from RNCOS states that the Indian e-commerce market is expanding at a rapid pace, and is likely to grow at a CAGR of 39% during 2013 to 2016, owing to the phenomenal growth of smartphones and tablets. It is further expected to touch $200 billion by 2020.